Basis trade involves exploiting the price difference between the spot market and the futures market for a cryptocurrency. This strategy is commonly used by traders to capitalize on arbitrage opportunities. In a basis trade, a trader buys a cryptocurrency at the current spot price and simultaneously sells a futures contract for that same cryptocurrency.

If the price of the futures contract is higher than the spot price, the trader locks in a profit when the contract expires. This strategy can be particularly appealing when a significant difference exists between the spot and futures prices. The goal is to profit from the convergence of these prices as the futures contract approaches its expiration date.

However, risks such as market volatility, changes in demand, and funding rates associated with futures contracts should be considered. Basis trades require careful analysis to ensure potential profits outweigh the risks involved.